The increasing use of credit cards provides ample evidence that consumers prefer to use electronic payment systems rather than carry large amounts of cash or suffer the hassle of writing multiple checks for small purchases. Despite the rising use of ATM networks and online banking and other means of electronic financial transactions, as well as individual financial tools like debit cards, credit cards, checks, and other personal payment means, there is still a huge global population of people who rely primarily on cash transactions and who still need a convenient and cost effective electronic payment system to send and receive money. Even with the widespread adoption of electronic payment systems, there is an increasing need for faster, cheaper and more convenient electronic payment systems for completing financial transactions. Further, there is a need for an electronic payment system that is more individualized such that financial transactions are easily concluded in a manner similar to cash transactions.
This need has led to the growing use of prepaid debit cards. Unfortunately, debit cards are primarily designed so that a consumer can cash-in the debit card at a merchant who has invested in a point-of-sale (POS) transaction terminal. Thus, as with credit cards, it is difficult for an individual to transfer a portion of the amount stored on a prepaid debit card to another individual without involving an inconvenient trip to a bank or a merchant with a POS terminal. There is a need for an electronic payment system that enables financial transactions to be concluded between individuals and without the need to directly involve a third party financial institution or an outside financial institution. Although many people do not have access to POS terminals, most have access to a portable wireless communications device, such as a cellular or mobile phone, BlackBerry®, personal data assistant (PDA), etc. Indeed, people now routinely take advantage of additional features provided by a typical mobile phone, such as text messaging, photography, and listening to music, as mobile devices have evolved to include an integrated PDA, MP3, paging, and e-mail capabilities, all in a single device.
There has been explosive growth in mobile telephony devices and other portable devices that handle communications either through voice, e-mail, SMS messaging, instant messaging, and the Internet. People will often remember to carry their mobile device or cellular phone with them, even if they forget to carry their wallet or car keys. Additionally, such mobile devices are ubiquitous in the U.S. and in many countries around the world. It is currently estimated that about 80 percent of the world's population has mobile phone coverage. Therefore, systems that permit such mobile devices to send and receive payments, just like cash, and provide other financial and mobile banking transactions, are very advantageous.
In addition to individual or one-on-one transactions, existing electronic transaction networks have also gained popularity recently. Known banking systems include credit card networks, ATM networks, Automated Clearing House (ACH) networks, debit card networks, and other similar networks. In addition, typical means for authenticating users and transactions in such networks include magnetic strips on cards and, recently, near-field radio frequency (RF) communications devices that allow for purchases using smart cards, tags, or other such components having RF-based communications components contained therein. While the near-field communications-based devices provide for a convenience of contactless payment, which was not previously known particularly with respect to ATM-based, debit-card-based, and credit-card-based commerce systems, currently implemented near-field RF-based devices have not provided the convenience, simplicity, and security that would be necessary for a consumer to feel secure in their electronic purchases.
However, even modern electronic financial networks have their limitations or inconveniences when attempting to engage in financial transactions. With respect to various conventional electronic payment systems done through on-line banking or other commerce systems, there has not previously been an ability to easily administer payments to or from an account holder's personal account. For example, recently popular systems, such as PayPal® from eBay® and TextPayMe® from Amazon.com®, have their advantages for conducting personal one-on-one financial transactions between two individuals using mobile devices. However, a key drawback to these systems is the need to open and maintain monetary funds in a specific account maintained by the system. However, funds availability in such systems could be a problem if a buyer wishes to engage in a financial transaction immediately, but does not have enough funds in his specific account. While transferring funds into that account may be possible, the inconvenience of having to do so, along with the risk that the purchase opportunity may be lost if the buyer cannot move fast enough (e.g., an auction, a garage sale, etc.).